Management Accounting for Software Product Purchase

Management Accounting
Name of the Student:
Name of the University:
Author’s Note:
Course ID:

Facts of the case:
• As the bank wants to purchase a software product
for implementing a new application, market research
needs to be conducted about the available products.
• Three products are identified- Product A (a
commercial package), Product B (a cloud-based SaaS
product) and Product C (commercially supported open
source software).
• Product A would have five sub-products with
different end-user costs and different CPU
requirements based on the number of users. In
addition, it would have disaster recovery site for
which licence fee has to be incurred and from the
second year, annual maintenance charge has to be
incurred as well.
• Product B is dependent on the number of varying
users along with their respective roles having product
access. No costs would be incurred for disaster
recovery sites ; however, there would be a fee for
customisations.
• Product C would be a licence-based subscription and
it requires customisation fee as well.

Graph showing five-year
costs:
100
150
200
250
300
350
400
450
500
550
600
650
700
750
800
850
900
950
1000
£0
£200,000
£400,000
£600,000
£800,000
£1,000,000
£1,200,000
£1,400,000
£1,600,000
£1,800,000
Product Wise 5 Years Total Cost
Product A Product B Product C
Nos. of End-Users
Total Cost